The oft-practiced but rarely disclosed tactic of securities lending has landed BlackRock and State Street in the courts. Here's what this practice is, and why it matters to you.

A handful of pension funds and trusts are suing giant asset managers, including BlackRock (ticker: BLK) and State Street (STT), over the arcane realm of securities lending. The claim: The firms kept too much profit from this corner of fund management for themselves, instead of disbursing more of those profits to exchange-traded-funds' shareholders and other fund investors.

The lawsuits focus attention on an industrywide practice whereby asset managers lend (usually to institutional short sellers) stock held by its funds...